WAITING FOR THE FOOTFALLS
Support measures necessary to rejuvenate ailing sectors after COVID-19 crimps profits
Shuttered shops and empty streets are becoming commonplace in London, Venice, Rome, Paris and Madrid, the erstwhile tourist hubs of Europe as the novel coronavirus continues to wreak economic havoc across the world.
Popular tourist destinations are no longer thronging with tour groups or excited families. Instead there is an eerie silence as cities across the world grapple with unprecedented challenges like lockdowns, as well as closed restaurants, offices, shuttered bars and cultural institutions. Border controls, travel restrictions, grounding of flights and cancellations have further compounded problems for travel and tourism operators across the world.
An immediate fallout of this has been the strains on businesses and jobs, even as industry experts warn that the travel and tourism sector is on the brink of a collapse.
Panos Sousounis, an economics lecturer at the Keele Business School in the United Kingdom, believes that the impact has been “severe” and could get even worse in the months ahead.
The overall impact is likely to be severe because of the governmentimposed travel restrictions and the entry restrictions imposed by various countries. Carriers, in particular, have already started clamoring for government bailouts and support. Other transporters, too, have responded by reducing services and seeking government support, he said.
The cruise sector has been in the limelight for the wrong reasons. After facing the brunt for spread of the disease in February, the sector has been witnessing widespread cancellations since then. Sousounis said that it is unlikely that consumers will return for cruises until the panic subsides.
“Tourism will be severely hit, of course, as the pandemic is projected to last from anything between six to 18 months — especially under ‘curve flattening’ measures — well into and beyond the summer period. Southern European economies rely almost exclusively on tourism revenues,” he said.
Sousounis is expecting winter holidays, such as ski trips, to be badly affected as well if the pandemic continues for some time or even resurfaces in the autumn. “I can imagine people being reluctant to book holidays and school excursions in the near future. The hospitality industry as well as travel and all peripheral businesses should brace for a bumpy few months ahead,” he said.
Rosario Silva, professor of Strategy at IE University in Madrid, said the extended government lockdowns would severely dent profits for operators during the normallybusy Easter holiday season.
“The worst case scenario for the European travel industry would be an extension of the restrictions for more than six months, which would imply the loss of activity during the summer,” Silva said.
According to the World Travel and Tourism Council (WTTC), which represents the private sector global travel and tourism, nearly 75 million travel and tourism jobs are at risk due to the global coronavirus epidemic. The industry could incur a GDP loss of around $2.1 trillion this year, it said.
Global travel could be adversely impacted by up to 25 percent this year, equivalent to the losses for three months of global travel, according to data from Londonbased WTTC.
Tiffany Misrahi, vice president of policy at WTTC, said: “Small and medium-sized business in the sector are particularly vulnerable and measures should be in place to stop operators and travel agents, from collapsing.”
The travel and tourism sector accounts for 10.4 percent of the global GDP and generates 320 million jobs roughly, said the WTTC. The WTTC wants governments to implement a series of measures for the swift recovery of the sector once the novel coronavirus outbreak is brought under control.
The international organization has called for a three-pronged strategy which, in addition to the recovery funds, will protect millions of people who rely on travel and tourism for livelihood.
The WTTC said financial help must be provided to protect the incomes of the millions of workers in the sector who are facing severe economic difficulties. In addition, governments should extend unlimited interest-free loans for global travel and tourism companies as well as for the millions of small and medium-sized businesses as stimulus to prevent them from collapses. All government taxes, dues and financial demands on the travel sector must be waived off with immediate effect, at least for the next 12 months, it said.
Misrahi said this action must be taken immediately. “There’s a need to act now — we cannot wait to address this crisis in the coming weeks or months. Every day we wait results in the loss of 1 million more jobs.”
The Association of British Travel Agents, or ABTA, has been urging the UK government to take immediate action to prevent the collapse of UK travel industry. The travel association has asked the UK government to help businesses in the short-term. Without this support, the association believes that perfectly viable and normally successful UK travel businesses employing tens of thousands of people could become bankrupt.
ABTA chief executive, Mark Tanzer, said: “We are running out of time; people are losing their jobs right now and some companies will be facing bankruptcy if nothing is done.”
If this continues on a significant scale then the financial protection schemes for holidays will come under immense pressure and there will be considerable delays in customer refunds, Tanzer said.
ABTA said in a statement, “The industry is also calling for immediate cash injections to businesses, either as direct government support for salaries or as underwritten loans, or both.”
Even as countries across the world scramble to prevent and control the epidemic, nations like the United Kingdom, France and Spain have come out with a series of measures to protect jobs.
The UK government has announced a 330-billion-pound ($388 billion) financial rescue package to support and protect businesses affected by the COVID-19, including those in retail, hospitality and leisure sectors. France is injecting 45 billion euros ($50.22 billion) in crisis measures to help companies, while Spain will provide 100 billion euros as loans and guarantees for companies.
“All the measures announced recently are in the right direction. However, one thing, which is seemingly missing, is the need for more coordination, including in the UK and the rest of the world. This is not a time for economic nationalism,” said Sousounis.
The economic impact of the disease needs to be contained in a coordinated manner. It is important for interlinked economies, as most of the European economies are, to support each other, he said.
“This is what, I think, the governments should do, but are not doing so.”
Turbulent times
The air transport industry has been one of the major casualties of the coronavirus epidemic. According to the International Air Transport Association, or IATA, the industry losses could reach $252 billion this year. It said the figures are based on a scenario in which the travel restrictions last for up to three months, followed by a gradual economic recovery later this year.
Alexandre de Juniac, IATA’s director general and CEO, said it was the “gravest crisis” faced by the airline industry.
“We are 100 percent behind the measures announced by the governments to slow the spread of COVID19. But we also need them to understand that without urgent relief, many airlines will not be around to lead the recovery,” De Juniac said.
“Failure to act now will make this crisis longer and more painful. Some 2.7 million airline jobs are at risk. And each of those jobs supports a further 24 in the travel and tourism value chain. Some governments are already responding to our urgent calls, but it is not enough to make up the $200 billion needed.”
IATA’s director general highlighted action taken by governments like Australia, Brazil, China, New Zealand and Singapore.
China’s measures include reductions in landing, parking and air navigation charges as well as subsidies for airlines that continued to operate flights to the country. The Hong Kong Airport Authority with government support, is providing a total relief package valued at HK$1.6 billion ($206 million) for the airport community including waivers on airport and air navigation fees and charges, and certain licensing fees, rent reductions for aviation services providers and other measures.
IATA is calling for direct financial support, loans, loan guarantees and support for the corporate bond market by the governments or central banks and tax relief.
Some international airports have suspended all flights amid the coronavirus lockdown, such as London City Airport, which announced on March 25 that commercial and private flights will be suspended until the end of April.
Travel pangs
On March 19, the World Tourism Organization, or UNWTO, a United Nations specialized agency responsible for the promotion of responsible, sustainable and universally accessible tourism, hosted a highlevel virtual meeting to urge international cooperation as it plans to launch a global guide for recovery.
“This unprecedented public health emergency has already become an economic crisis which will come at a social cost,” said UNWTO’s secretary-general Zurab Pololikashvili.
The secretary-general added that tourism “is the hardest hit sector and all our best estimates have been overtaken by the changing reality”.
UNWTO is set to release more recommendations for the industry recovery. The document will highlight the steps governments and other authorities need to take to mitigate the impact of COVID-19 on the tourism sector and to then accelerate recovery.
Martine Ainsworth-Wells, director of destination consultancy A&W and former director of marketing & communications for Visit London, said travel and tourism is “used to severe impacts” such as 9/11, SARS, and foot and mouth disease and is quite “adept at reacting and reformatting themselves”.
Hotels offering medical staff and key workers rooms and some restaurants and bars offering takeaway food are providing the much needed respite while restrictions are in place, Ainsworth-Wells pointed out.
But it’s not going to be a quick fix that will be settled in the months to come. Experts say the tourism industry might have to rely on national tourism, if there is any. In addition, hotels could offer rooms or packages at reduced rates to recover some lost revenue.
“Governments have to extend any support measures to avoid mass closures or substantial market restructuring,” said Sousounis from the Keele Business School.
“It would be wrong to assume that businesses can come out of this unscathed. Even with government support, some cost sharing is inevitable and businesses should think about their long-term position rather than short-term liquidity, which will be guaranteed under government support (notwithstanding) constraints.”
IE University’s Silva said the full effect of the crisis will depend on how long it will take to eradicate the pandemic. “If the mobility restrictions extend in time, and the behavior of the tourists change, the scenario will be more complicated for the industry and it will require more structural measures.”
However, based on past slumps, the industry is expected to recover once the situation has stabilized.
“The tourism industry has proved to be very resilient, as it recuperated very fast from previous crises,” Silva said.
WTTC’s Misrahi echoed these sentiments: “The travel and tourism sector is extremely resilient and has the ability to bounce back. Countries are better prepared than they were 15 years ago and going forward I hope countries will integrate their knowledge and be better prepared if an outbreak happens again.”
Governments have to extend any support measures to avoid mass closures or substantial market restructuring.”
Panos Sousounis, economics lecturer at the Keele Business School in the United Kingdom